What a difference a week can make. In the past week we have seen the trade talks between the USA and China turn from encouraging to China announcing that no trade talks will be scheduled any time in the near future. Just last week we were told that no American troops are going to the Middle East- this week? 10,000 (probably to start with) along with a quite impressive Naval and air presence.
Up until last week there was a virtual blackout in the mainstream media about the failing policies of the world central banks. This week- in the Wall Street Journal of all places there was a headline “Negative Rates, Designed to Jolt Europe, Become A Crutch”. “Central banks can’t quit the policy, creating economic distortions.” (My comment) They also can’t quit creating “money” out of nowhere because the faux demand ceasing to exist would result in a massive re-pricing of all assets to TRUE value based upon supply and REAL demand- not demand that is keystroked into existence by someone who does it because they can.(Let’s be honest- we ALL would-if we could but we would be in jail so we don’t!)
Gee- isn’t that what I have been saying for 10 YEARS NOW? Once you start “printing” money and distorting asset prices if you stop history tells us with a 100% accuracy rating that the distorted (bubble) prices will violently correct back to a market value and not into la-la land where they currently reside.
If they don’t stop look for a destroyed fiat currency. Each and every intervention has to be bigger than the last to get the same result. Maybe that is why central banks are purchasing gold at a record pace?
Stocks, bonds and Real Estate will likely correct violently to the downside if the faux demand ever stops. Keep in mind that the Market propping has NOT stopped but the world economy is falling rapidly even as massive stimulus is being deployed to stop it.
The headlines are full of stories (rarely mentioned on the financial game shows) that show a rapidly declining global economy. Shipping rates crashing, cargo falling, layoffs in manufacturing galore, stores closing all over the place and again at record levels. Auto delinquencies at record levels, interest rates inverted (3-month rate is higher than the 10 year rate as I write this!) Trump and Pence pleading for a 1% rate cut in the “greatest economy of all time”. I watched a video with John Williams of Shadow Government Statistics where he stated that the unemployment rate is actually 21.2% RIGHT NOW. All Mr. Williams does is report the government’s OWN numbers the way they would have been reported back in the 1980s with no “massaging”. Just looking around at your current surroundings- which makes more sense- 3.6% or 21.2%?
Just yesterday I met up with a friend from Long Island- an attorney who had just come from a closing in Manhattan. The luxury condo that was purchased was bought for $3.9 million. That same condo was purchased one year ago for $4.6 million. (That is a 15% drop in a year).
There are 78,000 homeless people in New York City. I saw many of them last night as I visited my daughter and met a client in lower Manhattan. This is a national disgrace that is a blight across the country but most visible in our large cities. There was an article on Zerohedge that asked “Which major west coast city is being overwhelmed by rats, drugs, garbage piles and homeless hordes?” The answer was San Francisco, LA, Portland and Seattle. I personally saw piles of garbage in lower Manhattan streets last night, luckily I saw NO rats but homeless people were visible on every block.
While many blame the democrats (all of these cities have been run by democrats for years) my take is a bit different. While policies that buy votes with promises of future riches for union employees that get outsized pension promises and raises that the private sector can no longer provide may bring about an economy’s demise faster, it is not the immediate cause of our tragic homelessness problem.
Remember this is a global “printing” spree and many outside this country have seen a currency collapse because of these same actions they see today. Others are in places (like China) where one day you can be a millionaire and the next day the government seizes your assets and you are destitute. (Or dead).
A lot of money poured in from overseas to inflate housing prices FAR beyond what working families can afford. All you have to do is watch some shows on HGTV and get an eyeful of our housing dilemma. I don’t watch those shows but my wife does and one morning I saw an episode (2 minutes of it anyway) where a young couple had a budget of $700,000.00 and a list of what they would like in the house. It was a Property Brothers episode. They took this young couple to a beautiful home that had all that they were looking for- both in the house and the area. The list price of the house was $2.4 MILLION. The reason they showed them that house was to give them a reality check. Personally, I think that if $700,000.00 can’t buy you what you want- maybe it’s better off waiting until reality sets in.
The foreign money, the hedge funds and groups like Blackstone and Blackrock buying up billions in real estate have propped up home prices similar to the way companies buy back stop to keep their prices elevated. It appears that finally the foreign money is slowing down and prices are starting to fall in many areas.
While this may not help our homeless immediately it may provide help to someone on the edge who is paying far too much for housing based upon their income (many of our younger generation) to avoid problems in the future.
While I am sure that some are out there because of mental problems or drug addiction keep in mind that often people resort to drugs or have mental problems once they feel hopeless and turn to drugs or alcohol to “forget their problems” leading to a further downward spiral. Having nowhere to turn makes it that much worse.
In our country there are epidemics in opioid addiction, drug and alcohol addiction and other forms of destructive behavior- very similar to what happened in the Soviet Union in the years leading up to their economic and political demise. The population was continually told just how great conditions were right up until the collapse which should have shocked no one but took most by surprise. If an event were to happen here we might have the same type of problem because of the 24/7 propaganda on the financial, political, and “news” shows.
In the meantime I also met with another friend who buys and sells antiques, collectibles and precious metals. We had asked him if he may be able to get us some silver and gold that we could buy. After a week or so we didn’t hear from him and wondered why. I called and was told that, after visiting the people who actually smelt the silver and gold, there was a major bank that was taking ALL of the supply. Whatever they got in was spoken for before it got there. When I guessed JP Morgan he acknowledged that I was correct. Ted Butler has reported (long ago) that they had 750 million ounces of silver and 20 million ounces of gold. If my friend is correct that number is growing very quickly right now. Russia has bought a million ounces of gold (approximately) each of the first 4 months of 2019 and central banks are buying at a rate FAR higher than last years record 671 tons.
Things are not always as they appear to be. This economy and the fake numbers we are being fed is a perfect example of how if you say something long enough it becomes acknowledged as the truth.
Look with your own eyes. If you see economic blight all over but “Baghdad Bob” on the financial game shows are telling you that all is great and it’s all blue skies ahead and it’s ALWAYS TIME TO BUY- do yourself a favor and do a little digging. It just may save you from the third bubble burst in the last 20 years. Or at least stay out of its way so when the recovery comes you have something to recover WITH.
In any case I don’t believe having a more diverse portfolio could hurt in times that are as uncertain as the ones we are in right now.